It is very fashionable to talk about networks and their importance for business. But what makes networks powerful, really? And for whom? The other day I stumbled upon a couple of articles in different domains. Funnily enough they all mentioned the same two ingredients for leveraging networks. It is all about closure and openness.

Closure and a high density of connections in a subnetwork cluster lead to expertise. Subnetwork cluster are very good at what they are doing. They learned their lesson and get incrementally better over time.

Openess on the other hand connects various subnetwork clusters. It is the basis for progress and innovation as it connects different ideas from different domains. The connection itself, however, is only the prerequisite. It is useless if you are not able to synthesize the information from the powerful expert subnetwork cluster and transform it into something new. Knowing smart people is not enough. You must use their input to create something new.

And here come the various articles in which I found this insight applied in different ways:

It started with Why Being The Most Connected Is A Vanity Metric. Michael Simmons talks about successful networking. And he points out that you doesn’t have one big network, but many subnetworks that are closed in themselves. And through connecting those subclusters which he calls brockering, you can take advantage of breadth, timing, and translation of information.

His insights are based on the work of Ronald Burt. It describes in more detail, for example here and here, the benefits of combining closure and openness in personal networks.

Networks and the Nature of the Firm, building on The Future of Firms. Is There an App for That?

Looking at an economy, firms are the closed subnetwork clusters with expertise. Now, the internet enables massively more links between entities and reduces transaction cost as well as barriers to entry. We see the rise of new firms that are able to coordinate a legion of suppliers, order of magnitudes larger than themselves, and connect them with a global audience. Those new firms take advantage of connecting clusters by transforming how matching of supply and demand is done.

Esko Kilpi comments on the article. He calls the above transformation of markets the switch of competitive advantage from scale to scope. He continues to ask if the ability to manage participative, self-organizing responsiveness is the real source of competitive advantage in the future. This would mean that one is not only able to extract innovation from various subclusters, but is also better able to design subclusters to solve specific problems.

Seemingly unrelated is the article Ugh, Steve Jobs. But have a closer look: If you want to be great as a product guy, you better connect to the experts (i.e. people, your users) who know the problem you want to solve inside out. You are also in dialogue to the various other stakeholders involved in your product as they have valuable insights – from their point of view. The art of product management is to synthesize the observations from these different sources to a solutions that is obvious afterwards.